Alphabet and Meta are trading around the low 20s on a forward price to earnings basis, a reset that pushes two of the market’s most closely watched growth franchises into range for traditional value screens.
Multiple trackers put Alphabet near the 22 area on forward P/E, while Meta sits around the mid-20s, levels that are no longer outliers in a market where the S&P 500 itself hovers a bit above 22 on the same metric.
The broad Communication Services sector, which houses both stocks, is near the low-20s as well, underscoring how far multiples have cooled after last year’s run-up.
Data providers show Alphabet’s forward P/E near 22, Meta’s in the ~24 zone, the S&P 500 around 22.5, and Communication Services about 20 to 21.
Those readings come from proprietary datasets maintained by GuruFocus for Alphabet, GuruFocus and StockAnalysis for Meta, and S&P-based dashboards at MacroMicro for the index and sector.
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Screens that cap forward P/E at 25 and look for double digit earnings growth will now surface two mega caps that also control critical distribution in search, social, video, and messaging.
The practical question is whether their earnings power can compound fast enough to offset the cost of an unprecedented buildout in AI compute and data centers.
The company lifted its 2025 capital expenditure outlook to a range of roughly $66 billion to $72 billion to accelerate AI infrastructure, even as advertising demand has remained resilient.
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This increase was telegraphed alongside summer results, and management has framed the spend as essential to product relevance and monetization.
Alphabet’s management reaffirmed an aggressive outlay for technical infrastructure and detailed a second-quarter capex run-rate that points to another heavy year of servers and data centers.
The company has said the investment reflects durable demand for AI-enabled services across Search, YouTube, and Cloud. The valuation reset comes with sturdier cash returns than in prior cycles.
Alphabet joined the dividend ranks last year and paired the move with a fresh $70 billion repurchase authorization. The board later lifted the quarterly payout and approved another $70 billion for buybacks in 2025.
Meta, for its part, initiated a 50-cent quarterly dividend in 2024 and has kept repurchases active, giving shareholders a blend of yield and buyback support while earnings fund the capex ramp.
Index level valuations have cooled from last year’s peaks, narrowing the premium that investors pay for scale, network effects, and AI leverage.
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With the S&P 500’s forward P/E hovering in the low-20s and Communication Services near that mark, the relative case for Alphabet and Meta looks less stretched than it did when the index traded several turns lower and AI narratives commanded scarcity premiums.
The bull case is that both companies have room to expand margins with automation, keep share in core ad markets, and create new profit pools around AI agents, commerce, and premium features, turning today’s infrastructure drag into tomorrow’s cash engine.
